According to the National Audit Office, the military pension insurance system will go broke in 2019, the labor insurance system in 2027, the insurance system for teachers in 2028 and that for civil servants in 2030. Even the national pension system that was introduced in 2008 will go broke in 2046, it says.
If the pension system is not reformed, not only military personnel three years from now, but any worker now under 54 and any civil servant below the age of 51 will not receive any pension at all.
There are three reasons why the pension system is facing this difficult situation. The labor insurance and the military personnel, civil servants and public school teachers insurance systems established in the 1950s were a way for the authoritarian government to appease the different professions by offering payouts far higher than the sums paid in. Insurance premiums were so low that there was no way that these systems would be sustainable.
In addition, the difference between the health insurance system and that of the pension schemes insures economic security after retirement, so it was almost predetermined that this kind of crisis would appear. The result is that the only way to solve the problem is to divide risk between generations.
Finally, Taiwan’s population is set to age rapidly over the next 30 years, and so it will be impossible for the younger generations to foot the bill for the older generations paying high pay-as-you-go premiums.
However, the goal of pension reform is not to pursue fiscal equilibrium. Even if different professions were willing to triple their premiums in order to pay for their own future pensions, such reform would turn social insurance into commercial insurance, and it would remove the shared risk that is spread across the general public.
At first sight, the government subsidies that make up for the difference between premiums and payments is a fiscal issue, but tax revenue comes from the tax-paying public. This means that the debate about pension reform is a fundamental value debate about income redistribution and generational transition.
The ultimate goal of pension reform is to guarantee the economic security for every worker after they have retired. This is why the first goal is to set a basic universal pension that covers every Taiwanese and as far as possible gives them a dignified life in retirement.
On top of this pension, a professional pension could be established that guarantees the income differences between different professions as a way of showing respect for the value of work.
We are suggesting that the government and civic groups provide clear individual reform proposals and financial plans to be debated by society at large. This could prevent the debate from deteriorating into an emotional argument between different professions that would turn questions over a social insurance system that spreads risk and promotes social unity into a dispute that deepens the social divide between professions.
If the government and civic groups could propose a universal basic pension system offering generous payments, they would provide a foundation for reforming labor, military personnel, civil servants and public school teachers, national and farmers’ pensions.
Based on shared risk, the public as a whole could then work together to ground the Taiwanese identity in their everyday lives, and the pension system could thus have the same positive effect that the National Health Insurance has had.
It is this that should be the ultimate goal of pension reform.
Translated by Perry Svensson
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